Edison Mission debtors win approval to assume partnership agreements

By Caroline Salls

Pittsburgh, Sept. 17 - Edison Mission Energy gas partnership debtors Western Sierra Energy Co. and Southern Sierra Energy Co. received court approval to assume Sycamore Cogeneration Co. and Kern River Cogeneration Co. gas partnership agreements, according to a Monday filing with the U.S. Bankruptcy Court for the Northern District of Illinois.

Southern Sierra Energy and non-debtor partner Chevron Kern River Co. share a 50/50 partnership interest in the Kern River project, and Western Sierra and non-debtor Chevron Sycamore Cogeneration Co. share a 50/50 partnership in the Sycamore project.

No defaults

According to Monday's ruling, the Chevron entities filed an adversary proceeding and relief from the automatic stay motion, arguing that Edison Mission's bankruptcy filing constituted an event of default by the gas partnership debtors on the gas partnership agreements.

The gas partnership debtors contend that because Edison Mission is not the parent as defined in the partnership agreements, its bankruptcy filing did not trigger a default.

Because Edison Mission's bankruptcy filing does not constitute a default by a parent under the agreements, the court said there are no parent-related defaults that would prohibit assumption under section 365(b) of the Bankruptcy Code.

In addition, the court said the gas partnership debtors' bankruptcy filings do not constitute defaults.

The Chevron entities' stay lift motion was denied, according to Monday's opinion. An appeal of that order is pending.

The bankruptcy court said a full trial on the adversary proceeding is necessary to determine whether California partnership law controls section 365 of the Bankruptcy Code.

Assignment concerns

The court also ruled that Edison Mission's exploration of sale options does not equal an intent to sell its interest in the gas partnership debtors, and those efforts do not show that the gas partnership debtors currently intend to assign the agreements or their interests in the cogeneration partnerships.

"The court finds that Chevron is not at risk at this time of having to deal with a substitute partner by virtue of the gas partnership debtors' assumption of the gas partnership agreements," the ruling said.

Edison Mission, an Irvine, Calif.-based developer of wind energy projects, filed for bankruptcy on Dec. 17, 2012. Its Chapter 11 case number is 12-49219.

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